Towards Customer Centric Retail Enterprise

Retail Strategy C-level Seminar at Seoul Grand Hyatt Hotel in October 8th.

  IBM Korea hold Retail Strategy Seminar in October 8th at Grand Hyatt Hotel, Seoul. It was an intriguing seminar from the points of timing and context. Recently, one of leading South Korea retail conglomerate chairman expressed his strong will on omnichannel transformation. IBM addressed this portion of session in the morning with client CEOs and IBM was invited to pitch "future of retail" and omnichannel.  Retail Strategy Seminar at Hyatt was evening seminar target to Korea Retail CxOs.

  
  Keynote speaker was Jill Puleri. She is the global leader for IBM’s Global Business Services retail consulting practice. She was recently named by Consulting Magazine as one of their Top 25 Consultants for her vision and strategy at IBM in the Retail Industry.

  Jill kicked off "future of retail" presentation by saying from the points of 4 growing influencing factors:

1) Consumer Expectations, 2) Future Customer Experience, 3) Disruption and disruptors, 4) Big data is now broader data and shared some data points such as 80% of all brands could disappear, 69% of US consumers order food online using mobile phone, and top two influences of purchases are friends posts / pinterest on social networks etc.

Future of Retail

  Then shared some video clip (which I've been deeply involved in). It actually developed to showcase the customer's journey on shopping experience in 2020. We intended to demonstrate the future millennial shopper's experience by showcasing sequence of event & shopping behavior.For example, from location based push service, to payment on smart watch, social based customer communication, turning social media to shopping, tablet based online shopping, real-time on/off line stock status checking, shopping at the physical store with digitized interactions, sales assistant Pad for customer analytic and shopping assistance on the spot, smart fitting room with cognitive computing 'Watson' including real-time sentiment analysis and assortment recommendations etc. Reaction was awesome.

Technology is blurring the boundary between stores and online

  What does 'blurring boundary' mean? Well, this means there's no online pure-play and brick and mortar exist any more. And physical stores will evolve into experience centers. Purchases will be ultimately made through online, from online site or via digital interactions at store. So finally, transparency of pricing, service levels and experiences across digital and physical channels will be getting more important than ever.

  What does this kind of leading player's innovation mean?

  It means they are leveraging social as a communication tool for millennial consumers and employees and creating real-time customer value using mobile as an enabler. It also implies the notion that they are providing a differentiated customer experience – anytime anywhere.

 Disruptors are succeeding and directly impacting traditional retailers.

  We are all observing emeging disruptors’ presence everyday. These are, #1, could be the one who sacrificed profits to be the online shopping reference, #2 investing in R&D particularly Amazon, #3, firstly broadest selection followed by
adding and dominates 1-2 categories annually, #4 simple strategy such as one click to buy, #5 strategy such as knows customers individually, #6 'all you can eat' loyalty schemes, and lastly but least, #6 disruptive offer such as same day delivery etc.

  

Underlying challenges in omnichannel transformation

  Lance Tyson, Sr. Managing Consultants in IBM Retail Center of Competency continued second session for omnichannel.  He articulated some insights actually IBM found from the study which IBM surveyed 30,554 consumers in 16 countries in 2013 to discover their opinions of omnichannel capabilities and the impact on choice. See below Key Findings.   Probably one of most significant different challenge in Korea would be the different price and assortment between online and offline, compare to US.

Korean customers intrinsically have the notion that online should be cheaper than offline and online is meant to be offer the more attractive promotions or benefits than offline. Meanwhile, US offer consistent price and experience across the online and offline. For example, US major retailers apply same pricing and assortment across channels with convenience to experience items while in-store. Another words, markdown avoidance is a top omnichannel capability in leading retailers.

  

  From the IBM survey, prioritization of customer's requirements of omnichannel varies by countries. Korean customers put the "track order status" as no.1 rank, while global average put the "pricing consistency across channels" as no 1. 

  So if we imagine the in-store experiences, try different size and color in the fitting room and return back or pick up at the store as free of charge - this could be obviously an advantage over online. But if item is not available, sales associates should able to order online with free of charge delivery. Many Korean retails seemed not have this kind of transparency and flexibility and it lead us to imply the underlying challenges in omnichannel.

Winning formula for Retail

 So in order to provide consistent and transparent experience across channels, retailers should think about below winning formulas:

1.      Develop relationship with your customers: The era of personalization vs paper ads for all

2.      From gut based to fact based decision making

3.      Product is hero: Creating differentiation with product

4.      The merchant mind set: Creating the WOW in store feel

5.      Play where she wants to play: Build world class omni channel

6.      The new health and wellness: Integrating Doctors, insurance companies and grocery stores.

In order to achieve this, possible key enablers or immediate recommendations would be;

     1. Probably starting point is to visualize agreed vision of customer experience that describes where/how to interact customers. So customer journey map could be a key enabler to agree the vision for customer experience across channels.

     2. Changes in MD and inventory planning. Inventory and mark down planning should be integrated across channels.

     3. Given the consideration of potential key issues in KPI such as, when online customer order claimed to in-store pick up or return, or reverse way, online order at store - in this case, there's issue embedded in terms of incentives for sales associates or revenue split between online and offline. We can resolve this kind of KPI issues by using shadow P&L as KPI management.

     4. Aligning SCM: One of leading US retailer integrates its SCM across channels/formats with allowing the ecosystem of suppliers to be more cost efficient. This company shared SCM data with suppliers for free, for suppliers to cut costs with better planning and inventory mgmt. This company also plans to combine sales data for specific suppliers with customer data, providing analytics service to those suppliers.

     5. Know your customer: Major US retailer adopted customer behavior analytics in the store. For example, IBM Presence Zone use wifi as meduim to analyze the customer behavior since RFID make a so much distraction if store is full of RFID signal congestions.

     6. Competitiveness of store: Macy's and David Jones attempted to make store as attractive place for shopping with service competitiveness. US Retailers are not only put every efforts to  analyze customer behavior and traffic to check conversion of foot traffic into sales, but also empowered sales associates with mobile to invigorate service competitiveness in store.

If you are interested in IBM Survey, please refer to below key findings from IBM IBV Retail Survey in 2013.

Some key findings from IBM Retail Survey.

     1. The development of online shopping in South Korea far surpasses global trends as such, 27% global vs 48% South Korea.

     2. When IBM Institution of Business Value surveyed the question "how much do you want to share your current location (GPS)?'", 19% of responded yes in 2012, whereas the number went up 36% in 2013.

     3. Percent of shoppers who showroomed for their last purchase - global 8.0% vs South Korea 12.3%. Showrooming defined as having visited a store before ultimately making the purchase online.

     4. Influencers of purchase behavior is concerned, friends posts / pins item purchased on social networks are the most influential on purchasing behavior in South Korea (56%), while China (85%) and Japan (41%).

     5. Priority of customer requirements on omni channel: Price consistency across channels (1), and in-store, locate out-of-stock item and get it shipped home (2), was ranked as 1 and 2 respectively in global average, while track order status (1), and locate item at in-stock location and get it shipped (2), was ranked as 1 and 2 respectively in South Korea.

     6. IBM defined the 4 customer categories based on degree of utilization of Social-Location-Mobile digital technology: Traditional, Transitioning, Tech Intrigued and Trailblazers. The Trailblazers want to do things themselves wherever, whenever; they need visibility and consistency. Survey result shows that China is the clear leader for SoLoMo adoption while South Korea and Japan consumers are waiting for a reason to adapt.

Epilog

  This kind of customer centric transformation has connotations of cultural and organizational challenges. Particularly in order to catch up unprecedented pace of customer's buying behavior, firm should be more nimble and more importantly, transparent and having mind-set put the consumer at the center of equations. Korea retail industry will experience the hard times to do this, but I think it will allow the firm to learn something to be a leader in these brave new world of competitions.

** The postings on this site are my own and don't necessarily represent IBM's positions, strategies or opinions.